Rolling with Rollups Exploring Optimistic & Zero Knowledge Solutions use cases

1. Rolling with Rollups Exploring Optimistic & Zero-knowledge Solutions, Use cases and Impact

2. Understanding Ethereum Rollups • Ethereum rollups have emerged as a promising solution to the blockchain scalability conundrum. • Rollups offer a way to mitigate these problems while maintaining the network's security and decentralization. • Ethereum rollups are second-layer solutions that bundle or "roll up" multiple transactions into a single proof, which is then submitted to the Ethereum main chain. • This approach allows for a significant reduction in gas fees and an increase in transaction throughput by offloading computation and storage from the main chain. • Rollups retain the security guarantees of Ethereum by using smart contracts to enforce rules and validate data.

3. How Ethereum Rollups Aid Scalability Ethereum • We can post two types of information on most blockchains: transactions and data. The storage of transaction information and on-chain processing can be heavy for the mainnet. • On the other hand, data resulting from a transaction is less heavy and remains the same no matter the number of transactions. proveFraud() execute_L2_tx(s2, tx2) !=s3 Rolled up Rolled up Rolled up • It is similar to how a cheque weighs the same irrespective of the amount on it. • So, instead of storing a whole transaction and processing it, blockchain rollups process and submit more transactions in one single piece of data. Rollup

4. 1 Types of Ethereum Rollups ZK 2 Rollups Optimistic Rollups Two main types of rollups are distinguished by their underlying cryptographic proof systems:

5. The Idea of Optimistic Rollups • Optimistic rollups rely on the assumption that all transactions conducted outside of the main network are valid. • However, they provide a window for users to challenge invalid transactions by submitting fraud proof. • The invalid transaction is rejected if the fraud proof is verified, and the user who submitted the proof is rewarded. • Optimistic Rollups offer increased throughput and reduced gas fees but have a longer finality due to the challenge period. • This trade-off makes them suitable for specific use cases where instant finality is not crucial.

6. 5 Steps in Optimistic Rollups Off-chain validation Block aggegation Once a certain number of transactions have been validated, validators aggregate them into a single block. This block includes a proof that shows the validators have agreed on the state of the off-chain system. A group of validators check the validity of the transaction. If valid, the validator will include it in a block. Submitting transaction Block submission Once the block is complete, the validators will submit it to the Ethereum mainnet. The block includes a single transaction that updates the state of the Ethereum contract that corresponds to the off-chain system. After the block has been submitted to the Ethereum mainnet, it is finalized and cannot be changed. However, if there is a dispute about the validity of a transaction, anyone can submit a fraud proof to challenge the block's validity. If the fraud proof is accepted, the block is reverted, and the offending validator stake is stashed. Finality and dispute resolution

7. Architecture of Optimistic Rollups From a technical point of view, optimistic rollups are managed by an architecture: Smart Contract: A series of smart contracts on Ethereum store roll-up blocks and track the state OVM: A virtual machine performs computations and stores off-chain state off the main chain. This mechanism allows you to act as a layer 2 for optimistic rollups. It is also called Optimistic Virtual machine; in addition to Off Chain Virtual Machine, however, separate from the Ethereum Layer 1 EVM. • • OVM Layer2 (optimistic -Rollup) Fraud Proof Tx (Calldata) Challenging Layer1 (Ethereum) OVM

8. How Fraud Proofs Work • In case of fraud, the roll-up smart contract verifies that it is true and cancels the batch and all subsequent ones restoring the correct state. Pre-State Root: 0x1245f9 A B Fraud Proof A C Rollup contract State Root: 0x1245f9 Bond ETH • To do this, the roll-up protocol takes care of re-executing the disputed transaction on layer 1 (L1) of Ethereum, determining who is right through the calculated state root. B C 10 Anyone who wants to produce a block must provide a bond i.e., ETH to be tied up first, a system similar to a Proof of Stake, so he can be punished with slashing if he behaves badly. NEW State Root: 0x1245f9 Merkle Tree Similarly, even those who provide fraud proof that is not true can suffer slashing as they have to commit funds with a bond (a sort of guarantee) 0xbc601f • Hypothetically, just one node is enough to make the rollup work since entering a dispute with fraudulent nodes would always be the winner, and the validity of the chain would be guaranteed. The Rollup smart contract can store the entire history of the state roots and the hash code of each batch A:20 B:110 C:170 D:210

9. Popular Optimistic Rollup Platforms Optimistic rollups are being used by several popular blockchain platforms, including Optimism & Arbitrum. These platforms provide an API and SDK for developers to build and deploy smart contracts that interact with the roll-up layer. • • Optimism Arbitrum Native token - OP Doesn't have a native token Uses multi-round fraud proofs making two parties (the ones that processed the transaction and the ones that submitted a challenge) go back and forth to narrow down the point of dispute. Features single-round fraud proofs, meaning that Layer 1 executes the whole Layer 2 transaction on-chain to verify the state root Layer 1 block gas limit doesn't matter as Layer 2 transactions are never entirely executed on Layer 1 Layer 2 transaction gas is bound by Layer 1 block gas limit Leverages Ethereum Virtual Machine Has its own Arbitrum Virtual Machine Uses a unique rollup design called Validium, which combines optimistic rollups with a zero-knowledge proof system for additional security and scalability. Leverages pure Optimistic Rollup technology

10. The Concept of ZK Rollups ZK-Rollups (Zero-Knowledge Rollups) use zero-knowledge proofs to validate the correctness of a batch of transactions. • Zero-knowledge proofs allow one party to prove to another that a statement is true without revealing any information other than the statement's validity. • In ZK-Rollups, a prover generates proof for a batch of transactions that the verifier can check quickly. This process ensures that only valid transactions are included in the rollup, and the main chain does not have to spend resources on validation again. • ZK-Rollups offer fast transaction finality, high throughput, and low gas fees. • However, their main drawback is the complex cryptography involved, making implementation more challenging. •

11. What ZK Rollups Do Differently From Optimistic Rollups To minimize transaction sizes, ZK-rollups represent account indices, which occupy less space than full addresses. This approach allows for the utilization of 3 bytes of memory, as opposed to 20 bytes. Merkle Root Hash Hash Hash Hash Hash Hash Account Account Account Account 0x04b64e95c4f9f7… 0xa7ed2936e78… 0x4ecd2fce4ea3… 0x7a250d5630539 Ethereum Accounts (20 bytes) 0x04b64e95c4f9f7… 0xa7ed2936e78… 0x4ecd2fce4ea3… 0x7a250d5630539 ZK-Rollup Accounts Index (3 bytes) 0x000000 0x000001 0x000002 0x000003

12. The Anatomy of ZK Rollups To implement ZK rollups, a smart contract is created on the Ethereum layer that acts as a bridge between the two layers. This smart contract is responsible for verifying the zk proofs submitted by the roll-up layer and updating the state of the Ethereum blockchain accordingly. • • ZK Rollup Transaction Process Layer-1 Blockchain (e.g. Ethereum) L1 Block L1 Block L1 Block L1 Block SNARK/STARK Proof SNARK/STARK Proof SNARK/STARK Proof Send Batch + Send Batch + Send Batch + Deposits Deposits Deposits Deposits Layer-2 Rollup Tx Batch Tx Batch Tx Batch Tx Batch Users + Transactions

13. Different Components of ZK Rollups Roll-ups Full Nodes: Even though transaction information is stored on the Ethereum network, ZK-Rollups also have full nodes. These full nodes maintain the entire state of the blockchain and enable the use of JSON-RPC API functionally. Layer 2 User Sequencer Prover Initiate transactions on the L2 zkRollup network Receive and aggregate individual transactions from users, batching them together in a specific order to create a single proof. The prover, using cryptographic tools like zk-SNARK or zk-STARKs, generates zero-knowledge proofs for the transaction batches. Rollup Light Client Verifier The Rollup light client on L2 receives the updated state information from the verifier on L1. Verifier is a smart contract on L1 & checks the validity of the zk proofs. Then it updates the contract state on L1 to reflect the latest zkRollup transactions. Layer 1

14. Blockchains Using ZK Rollups

15. The Limitations of ZK Rollups Zk-rollups exhibit limited EVM compatibility due to their unique approach to mapping Layer 2 (L2) wallet addresses to Layer 1 (L1) wallet addresses through a single set of private keys. Zero-Knowledge Proofs (ZKPs) can hash transaction data, but they cannot independently interact with smart contracts. This limitation arises from the separate calculations performed for each block, as state transitions strictly follow valid states.

16. The Promise of ZK EVM User Transaction • ZK-EVM is a virtual machine that executes smart contracts in a way compatible with zero-disclosure computing. This is the key to creating an EVM-compatible ZK Rollup. Tx Tx Tx Tx Tx Tx batch zkEVM RPC nodes Batched transactions • This essentially means that applications can be deployed onto ZK-Rollups, with more or less the same codebase they use for Ethereum, preserving composability with the EVM while not compromising on security. zkEVM Layer 1 = block Validity Proof 1 Transaction • zkEVMs are still in their initial testing phase and will likely see significant battle testing through 2023. Scroll, zkSync; Polygon have all launched zkEVMs running in testnet. Ethereum Layer 2 =

17. • In the EVM, a node operator can see the operations being performed. You can “see” them in the sense that it is possible to trace the input and output data of these operations, including their intermediate states. • This is possible because the EVM has an open runtime environment; the cryptography used in the process is only there to protect certain sections of the code (such as addresses and token handling authorization). Enhancing EVM with ZKEVM • But in zkEVM environment, we can see the input data, but this is not actually the actual data, but a series of data generated by ZKP cryptography. • Thus, basically, the data input is a series of data that allows the zkEVM to verify that what we say is true, but without ever revealing the real information that gave rise to that data.  • This input data is accompanied by execution data and a series of token data, which the zkEVM aggregates. After grouping them, the zkEVM has everything necessary to apply the process that will allow it to know if the input data is correct, and ; • If so, the zkEVM generates the status changes that indicate to the network that the smart contract has been executed, and, In addition to that, tests are generated that indicate that such data and execution are correct.

18. Breaking Into A ZKEVM Polygon ZKEVM • Polygon zkEVM is the combination of Polygon Hermez’s evolution and technological breakthroughs derived from work done on Polygon Zero. RPC calls zkNodes • Using Vitalik’s framework for the different types of zkEVMs, Polygon zkEVM is a Type 3 zkEVM, with the intention to progress to a Type 2 zkEVM. Synchronizer Aggregator Sequencer • Looking to prover architecture, Polygon zkEVM uses a unique Proof-of-Efficiency consensus mechanism in conjunction with a cluster of state machines which enables greater prover efficiency. zkEVM Rollup/PoE (L1) Rollup/PoE (L1) Bridge (L2) • In terms of data availability, will use a hybrid model (either Validium or Volition) where validity proofs are stored on-chain, while some data is stored on or off-chain. • On the chain performance side, Polygon zkEVM mainnet beta went LIVE on March 2023, and the current TVL sits at $40M already. User User L2

19. The Different Types of ZKEVM Compatibility • Can verify an environment that looks exactly like Ethereum, and even the Ethereum Chain itself • Can scale the Ethereum L1, and not just rollups • Maximally easy for rollups because you can share infrastructure (incl. execution clients) • Takes a very long time to generate proofs 1 • Can verify an environment that looks exactly like Ethereum, but with minor changes (e.g. state tree) that don't touch the application layer • Fully compatible with almost all Ethereum apps • Can share most infrastructure • Takes a long time to generate proofs 2 • Modify the EVM only by changing gas costs • Makes it faster to generate proofs • Introduces a few incompatibilities • Can verify an environment that is similar to Ethereum, but with minor changes (eg. hash function, no precompiles) that do touch the application layer • Fully compatible with almost all Ethereum apps • Can share a lot of infrastructure • Faster to generate proofs 2.5 3 • Compiles contracts written in Solidity, Vyper or other high-level langs to a specialized VM, and proves that • Not compatible with some Ethereum apps • Can't share a lot of infrastructure • Fastest proof generation time, saves costs and reduces centralization risks 4 Performance

20. New The Newest Addition to zkRollup Stack: Polygon CDK Polygon CDK is the evolution of Supernets. It offers projects the ability to launch ZK-powered app-specific L2 Rollups for Ethereum. ● Its highly modular and devs can tailor-make chains according to their requirements by choosing Polygon CDK components: ● CDK Component Example Section All chains deployed using Polygon CDK are interoperable through a shared ZK Bridge (LXLY) with automatic access to the unified liquidity of all Polygon chains, and one-click access to the entire liquidity of Ethereum. Virtual Machine zkEVNM Mode Validium Data Availability DAC Sequencer Centralized Gas Token Custom

21. New CDK CHAINS Polygon zkEVM Polygon PoS C1 C2 C3 Cn INTEROP LAYER ETHEREUM

22. New Examples of Polygon CDK based App-chains Canto: A neo finance project:   It has migrated to custom ZK-powered Layer-2 designed with Polygon CDK framework. The L2 will allow Canto to achieve permissionless sovereignty and shared liquidity of Polygon chains plus Ethereum via common ZK bridges without compromising the user's security. Wirex: The global leader enabling crypto payments:   It has built an app-chain focused on handling just the payments. Wirex's initial use cases for the CDK chain will be non-custodial visa cards integrated with the Account Abstraction feature. Wirex mentioned the Polygon CDK interoperability, unbounded scalability, and advanced ZK proofs among their top reasons for building with Polygon CDK. **Capx, Aavegotchi, Gnosis pay, and Astar Network are also among the first pioneers building with Polygon CDK

23. The Future Ahead  “It turns out that in this space, oftentimes, it is not just about technology. Sometimes, it’s the network effects – the culture of the community – that is the most important thing.” • zkEVMs are still in their initial testing phase and will likely see significant battle testing through 2023. Scroll, zkSync, Polygon, and Starknet have all launched zkEVMs running in testnet. • But who will win? Justin Drake, a researcher for the Ethereum Foundation, has said,

24. Rollup As A Service on Zeeve To interact with various Roll-ups & zkEVM, you'll need an API endpoint or dedicated infrastructure.   You can do this by running your own nodes, and setting up other essential components or you can leave the heavy lifting to Zeeve using our Rollups-as-a-service.   Zeeve Provides dedicated infrastructure support for Polygon zkEVM nodes. For app-specific OP and ZK rollups, use OP Stack and Polygon CDK on the Zeeve platform.   Get your Rollup ready for production use with additional infrastructure components and enterprise-grade security, 24*7 monitoring, detailed analytics, alerts & notifications.   With 27,000+ developers, 40+ large enterprises, and 6000+ nodes deployed, Zeeve is the preferred Web3 infrastructure automation provider for enterprises & developers.

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